CFA Level 1 Mock Exam B: Morning
According to the CFA Institute Code of Ethics and Standards of Professional Conduct,
trading on material nonpublic information is least likely to be prevented by establishing: -
Answer Selective Disclosure
After a firm presents a minimum required number of years of GIPS-compliant
performance, the firm must present an additional year of performance each year,
building up to a minimum of: - Answer 10 years of GIPS-compliant performance
After a firm presents a minimum of five years of GIPS-compliant performance, the firm
must present an additional year of performance each year, building up to a minimum of
10 years of GIPS-compliant performance.
Disclosure of confidential CFA exam information will most likely be detected by the
Professional Conduct staff through: - Answer monitoring online and social media
Which of the following is *least* likely part of the CFA Institute Standards of Professional
Conduct, Standard V(B)-Communication with Clients and Prospective Clients?
Members and candidates must: - Answer make reasonable efforts to ensure that when
communicating investment performance information it is fair, accurate, and complete.
An individual wants to be able to spend €80,000 per year for an anticipated 25 years in
retirement. To fund this retirement account, he will make annual deposits of €6,608 at
the end of each of his working years. He can earn 6% compounded annually on all
investments. The minimum number of deposits that are needed to reach his retirement
goal is closest to: - Answer Using a financial calculator, the funds needed at retirement
(R on the timeline) are calculated: N = 25; I/Y = 6%; PMT = €80,000; Future value (FV)
= €0; Mode = End. The calculated present value (PV) is €1,022,668.
PV = A[1−1(1+r)Nr]
= 80,000[1−1(1.06)250.06]
= 1,022,688
Then, €1,022,668 is used as the FV (at R on the timeline) for the accumulation phase
annuity as per: I/Y = 6%; PV = €0; PMT = −€6,608; FV = €1,022,668; Mode = End. The
computed N is 40
A company has an unsecured line of credit and needs to maintain its EBIT-to-interest
coverage ratio greater than 2.0. Its EBIT is estimated to be between $36 million and $48
million, with all values equally likely. If the forecasted interest charge for the year is $20
million, the probability that EBIT/interest will be more than 2.0 is closest to: - Answer
The EBIT-to-interest ratio is equal to 2.0 when the EBIT is $40 million. Given that the
values between $36 million and $48 million are equally likely, the probability of the ratio
being equal to or less than 2.0 is 33.3% (= [$40 million − $36 million]/[$48 million − $36
million]). Consequently, the probability of the ratio being greater than 2.0 is 66.7% (i.e.,
1 − Probability of the ratio being equal to or less than 2.0).
, CFA Level 1 Mock Exam B: Morning
The variance of returns of Asset A is 625. The variance of returns of Asset B is 1,225.
The covariance of returns between Asset A and Asset B is 600. The correlation of
returns between Asset A and Asset B is closest to: - Answer ρ(Ri,Rj) =
Cov(Ri,Rj)/σ(Ri)σ(Rj)
where
Ri and Rj = the returns of assets i and j
Cov(Ri,Rj) = the covariance of returns between assets i and j
σ(Ri) and σ(Rj) = the standard deviations of returns of assets i and j
In this problem, the correlation is 600(625√×1,225√)/=0.6857~0.69.
The central limit theorem is best described as stating that the sampling distribution of
the sample mean will be approximately normal for large-size samples: - Answer for
populations described by any probability distribution
Given a large random sample, which of the following types of data are least
appropriately analyzed with nonparametric tests? - Answer numerical values
nonparametric tests - Answer primarily concerned with ranks, signs, or groups and they
are used when numerical parameters are not known or do not meet assumptions about
distributiosn
A group of fund analysts have to select the first, second, and third best fund manager of
the year for 2012 based on their subjective judgment. If 10 fund managers are
candidates for the three awards, the number of ways in which each analyst can make
his ranking is closest to:
look up other counting problems as well - Answer This problem is a counting one in
which order does matter. For this reason, use the permutation formula Prn=n!(n−r)!,
where
n = the total number of fund managers; in the problem, n = 10.
r = the number of fund managers that will receive the awards (first, second, and third); in
the problem, r = 3.
10P3=10!(10−3)!=10!7!=3,628,8005,040=720
The bond-equivalent yield for a semi-annual pay bond is most likely: - Answer equal to
double the semi annual YTM
According to the CFA Institute Code of Ethics and Standards of Professional Conduct,
trading on material nonpublic information is least likely to be prevented by establishing: -
Answer Selective Disclosure
After a firm presents a minimum required number of years of GIPS-compliant
performance, the firm must present an additional year of performance each year,
building up to a minimum of: - Answer 10 years of GIPS-compliant performance
After a firm presents a minimum of five years of GIPS-compliant performance, the firm
must present an additional year of performance each year, building up to a minimum of
10 years of GIPS-compliant performance.
Disclosure of confidential CFA exam information will most likely be detected by the
Professional Conduct staff through: - Answer monitoring online and social media
Which of the following is *least* likely part of the CFA Institute Standards of Professional
Conduct, Standard V(B)-Communication with Clients and Prospective Clients?
Members and candidates must: - Answer make reasonable efforts to ensure that when
communicating investment performance information it is fair, accurate, and complete.
An individual wants to be able to spend €80,000 per year for an anticipated 25 years in
retirement. To fund this retirement account, he will make annual deposits of €6,608 at
the end of each of his working years. He can earn 6% compounded annually on all
investments. The minimum number of deposits that are needed to reach his retirement
goal is closest to: - Answer Using a financial calculator, the funds needed at retirement
(R on the timeline) are calculated: N = 25; I/Y = 6%; PMT = €80,000; Future value (FV)
= €0; Mode = End. The calculated present value (PV) is €1,022,668.
PV = A[1−1(1+r)Nr]
= 80,000[1−1(1.06)250.06]
= 1,022,688
Then, €1,022,668 is used as the FV (at R on the timeline) for the accumulation phase
annuity as per: I/Y = 6%; PV = €0; PMT = −€6,608; FV = €1,022,668; Mode = End. The
computed N is 40
A company has an unsecured line of credit and needs to maintain its EBIT-to-interest
coverage ratio greater than 2.0. Its EBIT is estimated to be between $36 million and $48
million, with all values equally likely. If the forecasted interest charge for the year is $20
million, the probability that EBIT/interest will be more than 2.0 is closest to: - Answer
The EBIT-to-interest ratio is equal to 2.0 when the EBIT is $40 million. Given that the
values between $36 million and $48 million are equally likely, the probability of the ratio
being equal to or less than 2.0 is 33.3% (= [$40 million − $36 million]/[$48 million − $36
million]). Consequently, the probability of the ratio being greater than 2.0 is 66.7% (i.e.,
1 − Probability of the ratio being equal to or less than 2.0).
, CFA Level 1 Mock Exam B: Morning
The variance of returns of Asset A is 625. The variance of returns of Asset B is 1,225.
The covariance of returns between Asset A and Asset B is 600. The correlation of
returns between Asset A and Asset B is closest to: - Answer ρ(Ri,Rj) =
Cov(Ri,Rj)/σ(Ri)σ(Rj)
where
Ri and Rj = the returns of assets i and j
Cov(Ri,Rj) = the covariance of returns between assets i and j
σ(Ri) and σ(Rj) = the standard deviations of returns of assets i and j
In this problem, the correlation is 600(625√×1,225√)/=0.6857~0.69.
The central limit theorem is best described as stating that the sampling distribution of
the sample mean will be approximately normal for large-size samples: - Answer for
populations described by any probability distribution
Given a large random sample, which of the following types of data are least
appropriately analyzed with nonparametric tests? - Answer numerical values
nonparametric tests - Answer primarily concerned with ranks, signs, or groups and they
are used when numerical parameters are not known or do not meet assumptions about
distributiosn
A group of fund analysts have to select the first, second, and third best fund manager of
the year for 2012 based on their subjective judgment. If 10 fund managers are
candidates for the three awards, the number of ways in which each analyst can make
his ranking is closest to:
look up other counting problems as well - Answer This problem is a counting one in
which order does matter. For this reason, use the permutation formula Prn=n!(n−r)!,
where
n = the total number of fund managers; in the problem, n = 10.
r = the number of fund managers that will receive the awards (first, second, and third); in
the problem, r = 3.
10P3=10!(10−3)!=10!7!=3,628,8005,040=720
The bond-equivalent yield for a semi-annual pay bond is most likely: - Answer equal to
double the semi annual YTM
